In response to the Financial Conduct Authority (FCA)’s announcement that it is to review the way UK insurers manage their back books, Nick Henderson, Insurance Partner at KPMG commented, “Given the potential scale of this undertaking, we envisage that there will be significant implications for both insurers and the market.
“Undoubtedly, there will be significant administrative costs for insurers, especially considering these policies often reside on archaic IT platforms. Furthermore, part of the pain will be interpreting the complexity within the policy terms themselves, which have evolved over time in line with changing regulation. Despite the burden, this is in turn a good opportunity for the insurers who have been delaying their IT and process transformation projects, to begin doing so."
“Furthermore, insurers – and the outsourcers who have taken a lot of the back book businesses - should take the opportunity to proactively address their older style and back book businesses, considering options including migration and product changes to ensure that good customer outcomes are achieved."
“Insurers are in a challenging space right now given the pension reform has built additional costs into already stretched budgets. Successful insurers will ultimately be those who are able to transform their current models to perform like wealth managers, have a clear view on customer value and operate on much lower margins.”
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KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with approximately 11,500 partners and staff. The UK firm recorded a turnover of £1.8 billion in the year ended September 2013. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 155 countries and has 155,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.
This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.